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### FROM DOJ/ATR/TRANS,ENERGY& AGRI (THU) 4.5'01 13:59/ST.13:58/N0.4260617223 P 2 DEPARTMENT OF JUSTICE Antitrust Division 

### JOHN M. NANNES ¢^Sas^^~~8~~~ ~Acting Assistant Attorney General Main Justice Building 950 Pennsylvania Avenue. N.W. Washington, D.C. 20530-0001 (202) 514-2401 / (202) 616-2645 (f) antitrust@justicc.usdoj.gov (ie http://www.usdoj.gov (World Wide Web) 

### April 5,2001
Eric J. Fygi, Acting General Counsel Department ofEnergy Washington, D.C. 20585 Dear Acting General Counsel Fygi: I am responding toyour letter dated March 20, 2001, seeking the vicws ofthe Attorney General about the potential effect on competition ofthe final rule published on January 22, 2001, setting forth new energy efficiency standards for central air conditioners and heat pumps. You specifically asked for our views about the impact on competition ofthe rule's prescription ofa 13 SEER (Seasonal Energy Efficiency Rating) standard for all product classes, except for niche products, and the desirability ofreducing the standard to a 12 SEER level for all subcategories. Your Icttcr requcstcd our vicws by March 30, but your staffagrecd to extend the response date to April 6. As you noted in your letter to the Attorney General, the Antitrust Division had earlier expressed its views on the proposedrule, whichprovided for a 12 SEER standard for air conditioners and a 13 SEER standard forheat pumps. Thc Division had concluded that the 13 SEER standard for heat pumps could have an adverse effect on competition and urged the Department ofEnergy to adopt a 12 SEER standard for heat pumps. We noted only minor concerns about the proposed 12 SEER standard for air conditioners. We have reviewed the final rule and determined that the 13 SEER heat pump standard still raises competitive problems. We have further dctcrmined that the 13 SEER 

### standard for air conditioners also raises competitive concerns. In our earlier letter, we identified and described three competitivc problems

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### DOJ/ATR;TRANS, ENERGYl AGRI (THU) 4. 5' 01 13:

### 59/Vr. 13:

### 58/NO. 4260617223 P 2 • 

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Eric J. Fygi, Acting General Counsel Department ofEnergy Washington, D.C. 20585 Dear Acting General Counsel fygi: DEPARThfENT OF JUSTICE Antitrust Division JOHNM. NANNES Acting Assistan.l Anomey General Main Justice Buildin, 950 Pennsylvania Avenue, N.W. Washington, D.C. 20530-0001 (202) 514-24011 (202) 616-2645 (f) antitrust@justicc.usdoj.gov (ioa:nIc1) htIp:/lwww.usdoj.gov(World Wide Web) April S, 2001

I 

### am responding to your letter dated March 20,2001, seeking the "jews ofthe 

### Attorney General about the potential effect on competition ofthe final rule published on January 22, 2001, setting forth new energy efficiency standards for central air conditioners and heat pumps. You specifically asked for our**view~** ahout the impact on competition of

### the rule's prescription 

### ora 13 SEER (Seasonal Energy Efficiency Rating) 

### standard for 

### all product classes, except for 

### niche products, 

### and the 

### desirability ofreducing the standard to a 12 SEERlevel for all subcategories. Yourletter requested our vicws by 

### March 30, butyour staffagreed to extendthe response date to April 6. As you noted in your h:lh:r La the 

### AUOmey Gcmeral,**th~** Antitrust Divisionhad earlier expTcssed its views on the proposedrole, whichprovided for a 12 SEER standard for air conditioners and a 13 SEER standard for heatpumps. The Division had concluded that the 13 SEER standard for heatpumps could have an adverse effeet on competition and urgcd the Department ofEnergy to adopt a 12 SEERstandard for heat pumps. We noted only minor concerns about theproposed 12 SEER standard for air conditioners. 

### We have reviewed the final rule and detennined that the 13 SEERbeat pump standard still raises competitive problems. Wehave further dctcmlinedthat the 13 SEER 

### standord for air

### conditioners also raises competitive concerns. 

### In ourearlierletter, \lI:e identified**~d** described three competitiveproblems.*^. A.

. -EE-RMISTD-98-4O I 

# 15 FROM DOJ/ATR/TRANS, ENERGY& AGRI (THU) 4. 5'01 14:00/ST. 13:53/N0. 4260617223 F 3 resulting from theproposed 13 SEER standard for heat pumps, including a disproportionate impact on smaller manufacturers' and an adverse effect on manufacturers ofspecialized equipment (the niche product manufacturers) and manufacturers ofequipment for space-constrained installation sites (such as manufactured housing, which accounts for a significant percentage ofthe country's housing starts). The exception made in the final rule for niche product manufacturers may alleviate competitive problems for their products, but the exception does not eliminate the difficulties formanufacturers ofstandard equipment who could notmake equipment that complied with the 13 SEER standard and still fit into space-constrained sites. The final rule also continues to have a disproportionate impact on smaller manufacturers ofheat pumps. The 13 SEER standard for air conditioners raises the same kinds ofcompetitive problems as the 13 SEER standard does forheat pumps. We urge the Department ofEnergy to consider the impact on competition and to adopt a 12 SEER standard for all products covered by the rule. 

### Sictely,

(/g ohn M. Nanncs

We noted in ourprevious letter that less than 20% ofthe total current heat pump product lines meet thenew standard, but for some small manufacturers, 100% oftheir product lines failed to satisfy the standard. The same is true for air conditioner manufacturcrs whcn the standard is 13 SEER. • ]e. _L.
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. FROM DOJ/ATR/TRANS, ENERGY&: AGRI 

### (THU) 4. 5' 01 14:00/ST. 13:53:'NO. 4261j617223 

### p 

### 3 •resulting from the proposed 13 SEER standard for heat pumps, including a

disproportionate impact on smallermanufacturers l and an adverse effect on manufacturers ofspeciali7.ed equipment (the niche product manufacturers) and manufacturers ofequipment for space-constrainedinstallation sites (such as manufactured housing, which accounts for a significant percentage ofthe country's housing starts). The ex.ception made 

### in the fmal rule for niche productmanufacturers may alleviate competitiveproblems for theiT productsl butthe exception does not eliminate the difficulties for manufacturers ofstandard equipment 

### who could not make equlpmentthat complied with the 

### 13 SEER standard and still 

### fit into space-constrained 

### sites. The ftnal rule also continues to have a disproportionate impact on smaller manufacturers ofbeat pumps. The 

### 13 SEER standard for air conditioners raises the same kinds ofcompetitive problems as the 13 SEER standard does for heatpumps. We urge the Department ofEnergy to considerthe impact on competition andto adopt a 12 SEER standard for all products coveredbythe rule.

I We noted in our previous letterthat less than 20% ofthe lOlal current heat pump product lines meet the new standard, but for some small 

### manUfacturers, 100% oftheir product lines failed to satisfy the standm·d. The same is true for airconditioner manufacturers when the standard is 13 SEER.